Financial Institutions Division IMF Statistics Department 1 Update

Financial Institutions Division IMF Statistics Department 1. Update of the Monetary and Financial Statistics Manual and the MFS Compilation Guide (MFSMCG 2016) 2. Framework for Monetary and Financial Statistics (MFSMCG 2016) Seminar on the Implementation of the International Statistical Standards in the Financial Statistics of Eurasian Economic Union (EAEU) Dilijan, Armenia May 31－June 3, 2016 Reproductions of this material, or any parts of it, should refer to the IMF Statistics Department as the source.

Financial Institutions Division IMF Statistics Department Overview of Presentation § § MFS Methodology Revision The MFSMCG Chapters MFSMCG — Important Revisions Implementation of the MFSMCG 2

Financial Institutions Division IMF Statistics Department MFS Methodology Revision: Background § Main reasons for the revision: • Align with the new 2008 SNA and BPM 6 • Address issues identified since the publication of the MFS Manual (MFSM) in 2000 and the MFS Compilation Guide in 2008, drawing from the accrued experience • Reflect developments in the financial corporations sector and financial markets 3

Financial Institutions Division IMF Statistics Department MFS Methodology Revision: Process Agreeing on the Framework § The revision process has started in 2011 • An Annotated Outline* and Issues Paper* were released to the members of the Experts Group for comments in November 2011. § An Experts Group Meeting in February 2012 with representatives from about 30 countries and 10 international or regional organizations • • • A Discussion Note* before the meeting, and Summary of Main Conclusions* after the meeting. Agreed to combine MFS Manual and Compilation Guide (MFSMCG), Thus a single document (MFSMCG) will replace the current MFSM and MFS Compilation Guide—merging + updates + new developments The prepublication version of the MFSMCG was posted on the IMF website in March 2016: http: //www. imf. org/en/data#Mon. Stat * Available at http: //www. imf. org/external/data. htm#guide 4

Financial Institutions Division IMF Statistics Department The MFSMCG Chapters I. Introduction II. Framework for Monetary and Financial Statistics III. Institutional Units and Sectors IV. Classification of Financial Assets V. Stocks, Flows, and Accounting Rules VI. Money, Liquidity, Credit, and Debt VII. Compilation, Source Data, and Dissemination of Monetary Statistics VIII. Financial Statistics 5

Financial Institutions Division IMF Statistics Department MFSMCG: important Revisions § Definition of money (broad money) proposed and concepts of money issuing, money holding and money neutral subsectors explained § Changes in institutional sectors stemming from the 2008 SNA (mostly related to subsectoring of the financial corporations sector) § Changes in the classification of financial assets based on the 2008 SNA changes (name changes and other changes) and more elaboration on borderline cases § Some minor changes in the valuation of financial assets/liabilities based on the clarification of concepts in the 2008 SNA (nominal value, book value) § A greater focus on the other financial corporations subsector § More elaboration on credit, debt, and liquidity aggregates 6

Financial Institutions Division IMF Statistics Department Important Revisions—Definition of Broad Money § Benchmark definition of money (broad money)—financial instruments issued by money-issuing sectors and held by money holding sectors that are: • • media of exchange, and close substitutes for the media of exchange because they can be converted into the media of exchange at short notice without incurring a significant loss on the amount initially invested. § Financial assets must be both liquid and a reliable store of value § to be included in broad money. The counterparts to money help to explain credit flows, and the composition of the Depository Corporations Survey can provide an insight into the factors affecting the supply of broad money. 7

Financial Institutions Division IMF Statistics Department Important Revisions—Financial Instruments, Sectors, and OFCs § Changes in classification of financial instruments based on the 2008 SNA (name changes) and elaboration on borderline cases § Changes in institutional sectors stemming from the 2008 SNA § (mostly related to subsectoring of the financial corporations sector—nine subsectors against five in 1993 SNA) A greater focus on the other financial corporations subsector: • • • Non-MMF investment funds Other financial intermediaries except insurance corporations and pension funds Financial auxiliaries Captive financial institutions and money lenders Insurance corporations Pension funds 8

Financial Institutions Division IMF Statistics Department Important Revisions—Special Cases of Sectoring § Captive financial institutions and money lenders— institutional units providing financial services other than insurance where most of either their assets or liabilities are not transacted on open financial markets. (¶ 3. 180 -3. 181 of the MFSMCG) § Includes entities transacting within only a limited group of units or subsidiaries of the same holding corporation, or entities that extend loans from own funds provided by only one sponsor. § Special Purpose Entities (SPEs). If treated as separate institutional units, allocated to sectors based on their principal activity, unless they fall into one of these four categories: (1) captive financial institutions, (2) artificial subsidiaries of corporations (not a separate institutional unit), (3) special purpose units of general government (general government) (¶ 3. 31 -3. 38 of the MFSMCG) 9

Financial Institutions Division IMF Statistics Department Important Revisions—Special Cases of Sectoring (Concluded) § Holding companies that only hold financial assets and do not exercise management activity: captive financial institutions. (¶ 3. 30 and 3. 182) § Sovereign Wealth Funds: a separate institutional unit of OFC sector or part of Central Government (¶ 3. 186 -3. 188) § Central Clearing Counterparties: other financial intermediaries (¶ 3. 157) 10

Financial Institutions Division IMF Statistics Department Important Revisions—Financial Instruments § Three sub-categories added to financial instruments: • • Investment fund shares/units added to Equity • Employee Stock Options added to Derivatives Pension entitlements and standardized guarantee schemes added to Insurance § Name changes: • • • Securities other than shares → Debt securities • Financial derivatives → Financial derivatives and employee stock options Shares and other equities → Equity and investment fund shares Insurance technical reserves → Insurance, pensions, and standardized guarantee schemes § New annexes (Annex 4. 1 -4. 3) on examples of debt securities issued through securitization, IMF Accounts, and Islamic Financial Instruments. 11

Financial Institutions Division IMF Statistics Department Important Revisions—Valuation of Financial Assets Classification Valuation method 1 Monetary gold (central bank) Market value SDRs (central bank) Market value Currency Nominal/face value 2 (in currency of denomination) Nominal value (in currency of denomination) Deposits Market or fair value Debt securities Nominal value (in currency of denomination) Loans Market or fair value (asset); book value (liability) Equity and investment fund shares Market or fair value 3 Insurance, pension and standardized guarantee schemes Market or fair value Financial derivatives and employee stock options Other accounts receivable/payable Nominal value 4 1 All foreign-currency-denominated assets and liabilities are converted to national currency units at market exchange rates. and face value are the same in this case. 3 Except for prepayments of insurance premiums which are recorded on a nominal basis. 4 Except for provisions under other accounts payable which are recorded at book value. 2 Nominal 12

Financial Institutions Division IMF Statistics Department Important Revisions—Credit, Debt, and Liquidity § More elaboration on credit, debt, and liquidity aggregates § Measures of credit have the same three dimensions as monetary aggregates: • • • the financial instruments included, the issuing sectors (lenders) the holding sectors (borrowers). § Liquidity aggregates include, in addition to broad money liabilities, other liabilities that are also liquid, but that do not meet all other characteristics of broad money. § The coverage of liquidity aggregates is much broader 13

Financial Institutions Division IMF Statistics Department Important Revisions—SDR Allocations The 2008 SNA recognized the change in treatment of SDR allocation already adopted in MFS. § SDR allocations are considered transactions and not OCVA. § SDR allocations are treated as foreign liabilities. 14

Financial Institutions Division IMF Statistics Department Implementation of the MFSMCG § Transition will start once the updated methodology is § § finalized in 2016 Monetary statistics and existing financial statistics will remain on 1993 basis until the transition starts Transition will include: • • • Revision of SRFs in STA’s systems Revision of data collection and IFS publication procedures Technical assistance and training to countries, regional groups Outreach to countries on implementing the revised methodology, including SRFs Special emphasis on coverage of OFCs § Dates for the changes in SRFs and IFS have not been set yet; A strategy of implementation is being finalized. 15

Financial Institutions Division IMF Statistics Department Framework for Monetary and Financial Statistics Reproductions of this material, or any parts of it, should refer to the IMF Statistics Department as the source.

Financial Institutions Division IMF Statistics Department Outline § Sources of statistical methodology for monetary and financial statistics (MFS), key concepts, organization and presentation. § Institutional Units and Sectors § Characteristics and classification of Financial Instruments § § § § Stock, Flows and Accounting Rules Characteristics and valuation of Financial Derivatives Compilation Framework for Monetary Statistics and Standardized Report Forms Money, Liquidity, Credit and Debt Central Bank and Monetary Authorities Accounts Financial Statistics Balance Sheet approach matrix Financial Statistics: Compilation Guidance 17

Financial Institutions Division IMF Statistics Department Sources of Statistical Methodology § The prepublication version of the MFSMCG was posted on the IMF website in March 2016 (http: //www. imf. org/en/data/Mon. Stat) § Other macroeconomic statistical systems • • Systems of National Accounts 2008 (2008 SNA) Balance of Payments Manual, 6 th edition, 2009 (BPM 6) Government Finance Statistics Manual 2014 (GFSM 2014—pre-publication) Some special topics v v Financial Soundness Indicators Compilation Guide (2006)—revision is under way Consumer Price Index Manual (2004) International Reserves and Foreign Currency Liquidity: Guidelines for a Data Template (2001) External Debt Statistics: Guide for Compilers and Users (2003) § Data Dissemination: GDDS, SDDS Plus 18

Financial Institutions Division IMF Statistics Department MFS Key Concepts § Monetary and financial statistics, as defined in the MFSM • • • Comprehensive stock and flow data Monetary statistics v Nonfinancial and financial assets and liabilities of financial corporations Financial statistics v Financial assets and liabilities of the entire economy § Broader definitions of monetary and financial statistics would include data on • • Security prices and yields Stock price indices Loan and deposit rates Exchange rates, etc. 19

Financial Institutions Division IMF Statistics Department MFS Organization and Presentation § Monetary statistics • • Sectoral balance sheets of financial corporations subsectors Surveys of financial corporations sector and its subsectors § Financial statistics • System of National Accounts 2008 Financial Account (records transactions) v Other Changes in Volume of Assets Account (records effects of exceptional events) v Revaluation Account (records value changes arising from price and exchange rate movements) Detailed flow-of-funds and related stock data v As described in MFSM and 2008 SNA v • 20

Financial Institutions Division IMF Statistics Department Institutional Units and Economic Sectors: Building Blocks § All macroeconomic statistics use the same core concepts: • • Units are aggregated into sectors Economic territory and residency Financial instruments Stocks, Flows, and Accounting rules (a later lecture) § Same concepts in BPM 6, 2008 SNA, GFSM and MFSMCG ensure consistency 21

Financial Institutions Division IMF Statistics Department Sectors of the Economy The SNA divides the economy into major sectors that play different economic roles. All institutional units are classified into sectors based on the economic characteristics. Classification is based on primary activity. § § § Financial corporations – financial intermediation function General government Nonfinancial corporations Households Nonprofit institutions serving households (NPISHs) Rest of World – Not a sector of the economy = all units outside the economic territory of the country 22

Financial Institutions Division IMF Statistics Department Financial Corporations Subsectors The Financial corporations sector includes units engaged in financial intermediation as their primary activity. Different subsectors are defined. Financial Corporations Sector has three subsectors • • • Central bank Other depository corporations (ODCs) v Deposit taking corporations v MMFs Other financial corporations (OFCs) v Non-MMF investment funds v Other financial intermediaries except insurance corporations and pension funds v Insurance corporations v Pension Funds v Financial auxiliaries v Captive financial institutions and money lenders § Definition of broad money is a key concept for defining other depository corporations § MFSMCG terminology: “Depository corporations” (DC) combines the central bank and other depository corporations 23

Financial Institutions Division IMF Statistics Department MFSMCG: Important Revisions § Definition of money (broad money) proposed and concepts of money issuing, money holding and money neutral subsectors explained § Changes in institutional sectors stemming from the 2008 SNA (mostly related to subsectoring of the financial corporations sector) § Changes in the classification of financial assets based on the 2008 SNA changes (name changes and other changes) and more elaboration on borderline cases § Some minor changes in the valuation of financial assets/liabilities based on the clarification of concepts in the 2008 SNA (nominal value, book value) § A greater focus on the other financial corporations subsector § More elaboration on credit, debt, and liquidity aggregates 24

Financial Institutions Division IMF Statistics Department Financial Instruments: Key Concepts § Financial instruments • • § § Financial assets and liabilities Other financial instruments Not all financial instruments are financial assets: Financial instruments that are contingent or conditional upon the occurrence of uncertain future events are not financial assets • lines of credit • loan commitments The “financial assets boundary” separates financial assets and liabilities that are included on statistical balance sheets from other financial instruments that are off-balance-sheet. 25

Financial Institutions Division IMF Statistics Department Financial Assets - Definition § Over which ownership rights are enforced, individually or collectively, by institutional units § From which economic benefits can be derived by holding or using the assets over a period of time § Most financial assets are financial claims arising from contractual relationships in which one institutional unit provides funds to another • Exception is gold bullion included in monetary gold 26

Financial Assets: Classification Financial Institutions Division IMF Statistics Department The draft MFSMCG and 2008 SNA/MFSMCG Monetary gold and SDRs 1993 SNA Monetary gold and SDRs Currency and deposits Debt securities Securities other than shares Loans Equity and investment fund shares Shares and other equities Insurance, pension, and standardized guarantee schemes Financial derivatives and employee stock options Other accounts receivable/payable Insurance technical reserves Financial derivatives Other accounts receivable/payable 27

Financial Institutions Division IMF Statistics Department Financial Assets: More Detailed Categories § Domestic and foreign currency § Deposits(related to the monetary properties of instruments) • • • Transferable and other Denominated in domestic and in foreign currency Included or excluded from broad money? § Debt Securities • • Negotiable instruments serving as evidence of debt • • Embedded derivatives Type of debt securities: bills, bonds and notes; negotiable certificates of deposits; commercial papers; asset-backed securities; nonparticipating preferred stocks; bankers acceptances; and trade bills Loans special cases Denominated in domestic and in foreign currency Included or excluded from broad money? 28

Financial Institutions Division IMF Statistics Department Financial Assets: More Detailed Categories (continued) § Equity and investment fund shares (liabilities) • Funds contributed by owners • Retained earnings • Current year result • General and special reserves • Valuation adjustment § Insurance, Pension and Standardized Guarantee Schemes • Five type of reserves applicable to insurance, pension, and standardized guarantee schemes. § Other accounts Receivable/Payable • • Trade credit and advances Other accounts 29

Financial Institutions Division IMF Statistics Department Stocks, Flows, and Accounting Rules: Key Concepts § Financial stocks and flows • • Stocks Transactions Revaluations Other changes in the volume of assets (OCVA) § Accounting rules • Valuation of financial instruments • Time of recording • Aggregation, consolidation and netting 30

Financial Institutions Division IMF Statistics Department Financial Stocks and Flows § Stocks • § Opening/closing stock: v Value of the outstanding stock of a financial instrument at the beginning/end of an accounting period Flows Transactions n n Interactions between institutional units through mutual agreement or law, and involve exchange of value or transfer Revaluations n Changes in the value of a financial instrument due to changes in: n Market price n Exchange rate OCVA n Other changes in the volume of assets (more in the next slides) 31

Financial Institutions Division IMF Statistics Department Financial Stocks and Flows: OCVA § Physical loss § Write-downs and write-offs are not the same: • • Write-downs of value are recorded as revaluation Write-offs indicate disappearance of assets, therefore OCVA § Loan recoveries • • OCVA entry as reversing the earlier provision or write off OCVA contra-entry: increases equity § Unilateral abandonment of a claim: OCVA • But debt forgiveness is not an OCVA: transaction § Changes in sector or instrument classification • • e. g. loans becoming negotiable: reclassify to securities De- and monetization of gold § Classification errors from previous periods are not OCVA: • previous periods should be corrected 32

Financial Institutions Division IMF Statistics Department Valuation of Financial Instrument in MFS Classification § § § § Valuation method Monetary gold (central bank) Market value SDR (central bank) Market value Currency Nominal / face value Deposits Nominal value Debt securities Market or fair value Loans Nominal value Equity and investment fund shares Asset: market or fair value Liability: book value § Insurance, pension and Market or fair value standardized guarantee schemes § Financial derivatives Market or fair value and employee stock options § Other accounts receivable/payable Nominal value 33

Financial Institutions Division IMF Statistics Department Accrual Recording – Follows Change of Economic Ownership Principle § All macroeconomic statistics use accrual recording § Records flows and stocks at the time economic value is created, transformed, exchanged, transferred, or extinguished • • May not correspond with time of payment (cash accounting) Two parties to a transaction should, in principle, record it simultaneously (symmetric recording) 34

Financial Institutions Division IMF Statistics Department Aggregation, Consolidation and Netting § Aggregation - sums up: • Summing of stock or flows across institutional units or financial instruments § Sectoral balance sheets (e. g. , ODCs) are aggregated across units within the sector • This preserve data on claims between units within a sector • • • units when grouped (e. g. , into sectors) Sectoral balance sheets are consolidated to obtain surveys Note Exception: no consolidation of equity Note Units report on a consolidated basis across all resident offices of the institutional unit § Consolidation - eliminates: • Eliminates stocks and flows between a group of institutional 35

Financial Institutions Division IMF Statistics Department Characteristics and Valuation of Financial Derivatives § A financial instrument that is linked to another specific financial instrument, indicator, or commodity, and through which specific financial risks can be traded in their own right in financial markets • • • Value derives from the price of the underlying instrument No principal amount is advanced Enable trading of risks v Interest rate v Currency value or fluctuation v Equity price v Commodity price v Credit § To qualify as a financial derivative, it must be possible to demonstrate that the contract has value • Market value or fair value methods 36

Financial Institutions Division IMF Statistics Department MFS Compilation Framework Each unit reports Balance sheet data (based on accounting standards) Central bank aggregates into subsectors Sectoral Balance Sheets (Standard Report Forms): • 1 SR for CB • 2 SR for ODC • 4 SR for OFC Map accounting to statistical data Central bank (and the IMF) compile and publish surveys • 1 SG for CB • 2 SG for ODC • 4 SG for OFC • 3 SG for DC • 5 SG for all FC Reorganize into analytical presentations 37

Financial Institutions Division IMF Statistics Department Source Data for MFS International Standards § International Financial § Reporting Standards (IFRS) Issued by International Accounting Standards Board (IASB): • • • Framework for Financial Statements presentation International Accounting Standards (IAS) Implementation Guidance National Standards § National accounting standards § Chart of accounts list all accounts in: • • • General ledger Subsidiary ledgers Trial balance § Not standardized across § countries Standardized only to a certain degree within countries (in some countries only within an individual subsector) 38

Financial Institutions Division IMF Statistics Department Characteristics of the SRFs § All countries report in same standard: comparability § Structure reflects methodology: Manual, Guide and draft MFSMCG § Surveys automatically derived from the SRFs § Use of a balance sheet framework § Three major pillars: • Sectoring of economic units • Classification of financial instruments • Accounting rules (valuation, recording, currency denomination) 39

Financial Institutions Division IMF Statistics Department SRFs: Reporting to the IMF § § § § Form 1 SR – Central Bank (CBS) Form 2 SR – Other Depository Corporations (ODCs) Form 4 SR – Other Financial Corporations (OFCs) Form 5 SR – Monetary Aggregates Forms 1 SR, 2 SR and 4 SR based on sectoral balance sheets Depository corporations survey (3 SG) is consolidation of CBS (1 SG) and ODCs (2 SG) Financial corporations survey (5 SG) is consolidation of (3 SG) and OFCs (4 SG) 40

Financial Institutions Division IMF Statistics Department Money, Liquidity, Credit and Debt § Broad Money: • What components are included in broad money • Benchmark definition in the draft MFSMCG • The application is done by the national authorities § Monetary base: support the expansion of credit § Credit and debt, and liquidity aggregates 41

Financial Institutions Division IMF Statistics Department Definition of (Broad) Money § Broad Money includes: media of exchange (usually: national currency holdings and transferable deposits in national currency) + other financial assets “easily” convertible into media of exchange without incurring a “significant” loss of the amount initially invested 42

Financial Institutions Division IMF Statistics Department What Components are Included in Broad Money M ng di ol -h ors ey ct on se M on ey se -iss ct ui or ng The dimensions of the broad money triangle : Financial assets that are “money” (“moneyness”) 43

Financial Institutions Division IMF Statistics Department Monetary Base § The funding base that underlies the money aggregates, rather than a money aggregate itself • Can support increases in credit and money through the money-multiplier § Monetary base is sometimes also called: • High- powered money • Base money • Reserve money • Central bank money 44

Financial Institutions Division IMF Statistics Department Liquidity Aggregates § Broader than broad money with respect to • Types of financial instruments • Issuing sectors § Components: • Broad money • Plus other liabilities that are somewhat liquid such as: v v v Longer-term liabilities of ODCs, OFCs, and other sectors Commercial paper issued by nonfinancial corporations Securities issued by central, state, and local governments § May be disaggregated into • Core liabilities of the financial sector • Non-core liabilities of the financial sector § Holding sectors the same as for broad money 45

Financial Institutions Division IMF Statistics Department Credit and Debt Aggregates § Credit is viewed from the creditor side, and debt is viewed from the debtor side § Credit provision by ODCs is the mechanism underlying the expansion of money: • • Credit multiplier similar to money multiplier Credit expansion leads to expansion of the money supply § Credit and debt have the same 3 dimensions as money • • • Financial instruments Issuers (borrowers, or debtors) Holders (creditors, or lenders) 46

Financial Institutions Division IMF Statistics Department Central Bank Subsector § Central bank: a subsector of financial corporations sector § Central banks are independent of government control § Different names – Central Bank, Reserve Bank, National Bank § Other institutional arrangements also in the central bank subsector: • • • Currency boards Government-affiliated agencies Currency unions and regional central banks 47

Financial Institutions Division IMF Statistics Department Central Bank Subsector Currency Union and Regional Central Bank Centralized model § A single central bank that operates in all member countries • • • Owned by the national governments BCEAO, BEAC, ECCB assets and liabilities are allocated to each country Decentralized model § Comprises a RCB and national central banks (NCBs) • • RCB is a separate nonresident unit Each NCB is a resident of a country in which located 48

Financial Institutions Division IMF Statistics Department Monetary Authorities’ Accounts § Sometimes central bank functions are carried out by the government: • • • Government liability for the issuance of currency Government liability for financial obligations to the IMF Government assets part of official international reserves § The monetary authorities’ accounts is an account that is augmented to cover all central bank functions 49

Financial Institutions Division IMF Statistics Department Central Bank Survey: Assets § Net foreign assets • § § § Claims less liabilities to nonresidents (by type of instrument) Claims on ODCs Net claims on central government • Claims (by securities and other claims) less liabilities (by deposits and other liabilities) Claims on other sectors • By sector 50

Financial Institutions Division IMF Statistics Department Central Bank Survey: Liabilities § Monetary base: • Currency in circulation • Liabilities to ODCs: reserve deposits and others • Deposits included in broad money (by sector) • Debt securities included in broad money (by sector) § Other liabilities to ODCs (excluded from monetary base) § Deposits excluded from broad money § Debt securities excluded from broad money § Loans § Financial derivatives § Trade credit and advances § Equity and investment fund shares § Other items (net) 51

Financial Institutions Division IMF Statistics Department Constructing ODCs’ Sectoral Balance Sheets § Starting point: structure of an ODC balance sheet: • • • Assets Liabilities Building block for deriving surveys § Map to statistical concepts: • • • Sectoring of institutional units Classification of financial instruments Accounting and valuation rules § Usually construct sectoral balance sheet for each type of § different ODC’s Aggregate to the ODC sectoral balance sheet 52

Financial Institutions Division IMF Statistics Department Deriving the ODCs’ survey § Consolidate the aggregated sectoral balance sheet • Consolidation inter–ODCs’ claims and liabilities § Key items for compiling money measures • Claims on central bank v • • Monetary base counterpart National currency holdings Liabilities included in broad money Liabilities excluded from broad money Other items 53

Financial Institutions Division IMF Statistics Department Derivation of the DCS § Consolidated statement of stocks and flows for the accounts of the central bank and other depository corporations surveys: § DCS = CBS + ODCS § Consolidate for: • Currency held by ODCs (ODC asset) consolidated against currency in • • circulation (CB liability) Claims on ODCs (CB asset) consolidated against borrowing from CB (ODC liability) Deposits of ODCs (CB liability) against deposits at CB (ODC asset) § But don’t consolidate for holdings of equity between CB and ODCs 54

Financial Institutions Division IMF Statistics Department Analytical Framework of the DCS The DCS is constructed around the following accounting identity: BML ≡ NFA + DC – OIN ≡ NFA + NDA Where: BML = NFA = DC = OIN = NDA = Broad money liabilities Net foreign assets Domestic claims Other items net Net domestic assets 55

Financial Institutions Division IMF Statistics Department Other Financial Corporations (OFCs) § Key features and importance of OFCs • Very diverse and evolving rapidly • Alternatives to banks for investment and obtaining credit • Growing insurance companies and pension funds engaged in different • types of financial assets Increasingly important for financial stability analysis § Increased demand for OFC data • Following 2008 SNA classification of financial corporations • Compiling OFC sectoral balance sheet and survey • Using SRFs to report for dissemination by STA 56

Financial Institutions Division IMF Statistics Department Other Financial Corporations (concluded) § Types of OFCs and methodological focus • Non-MMF investment funds—definitions, fund types, and sub-groups • Insurance corporations and pension funds—definitions, insurance and • • technical reserves, and statistical issues Other Financial Intermediaries (OFIs except insurance corporations and pension funds)—definitions, demarcation of ODCs and OFIs, and types of OFIs Captive financial institutions and money lenders—definitions, types of captives Financial auxiliaries—definitions, types of auxiliaries, data collection issues, E-money Corporations—as OFCs or ODCs? § Compilation Strategies 57

Financial Institutions Division IMF Statistics Department OFC Sectoral Balance Sheet and Survey § Collection of OFC data • Include the most relevant institutions and use metadata to describe • types of OFCs covered or excluded Use a format that allows mapping to SRF for OFCs § OFCs’ sectoral balance sheet • Present gross assets and liabilities • Serve as building block for deriving OFC and FC surveys § OFC survey (OFCS) • Claims/liabilities between units in OFCs are netted out in the consolidation • Provide an analytical presentation of the positions in stocks of OFCs 58

Financial Institutions Division IMF Statistics Department Financial Corporations Survey (FCS) § FCS is a consolidation of OFCS and the depository corporations survey (DCS) • • • Covers the entire financial corporations sector Contains the same asset categories as DCS, but does not show broad money components Has four levels of consolidation adjustments v v • Elimination of the positions between DCs and OFCs Other Items (net) also include consolidation adjustments in compiling OFCS, ODCs, and DCS Provide an analytical presentation of the positions in stocks of FCs 59

Financial Institutions Division IMF Statistics Department Financial Statistics (1) § Comprehensive stock and flow data on financial assets and liabilities of all sectors and between the economy and the rest of the world • • Have a wide range of uses, such as tracking flows of financial resources, pattern of interactions between financial and real sectors, identifying financing insufficiencies, vulnerabilities, and imbalances etc. Can cover microeconomic detail on financial subsectors and instruments § Variants have different names • • • Flow of funds Capital and Investment accounts Financial Accounts (Compilation Guide) Table of financing and investment (TFI) From-whom-to-whom accounts Template for minimum set of internationally comparable sectoral accounts 60

Financial Institutions Division IMF Statistics Department Financial Statistics (2) § Different Formats of Financial Statistics • Basic financial statistics offer simplified methods to construct accounts, • • covering MFS, government finance, BOP, and IIP statistics Integrated capital and financial account—best picture of investment activities, providing detailed breakdown of resources and uses Fully configured matrix—full detail from-whom-to-whom-with-whatinstrument matrix, but rarely published § Financial accounts are often expressed in terms of financial resources provided to a sector and financial uses by a sector • • Resources must equal uses Important for analysis of financial flows and compiling accounts 61

Financial Institutions Division IMF Statistics Department Financial Statistics (concluded) § Rest of the world (ROW) in financial statistics—domestic sectors’ positions and flows with nonresidents are separately identified § ROW in SNA integrated accounts—SNA current accounts depict transactions of the economy and its sectors, including transactions with nonresidents (a measure of net financial payments from abroad) § ROW in financial account—in net lending/borrowing, the net figure for ROW is equal to savings from the Current Account, which are counterparts to domestic current account and financial transactions with nonresidents § ROW in balance sheet—a component of the national balance sheet, which equals national stock of real assets plus net positions with ROW 62

Financial Institutions Division IMF Statistics Department Financial Statistics: Compilation Guidance (1) § Challenges in compiling financial accounts • • Capture full financial sector or all significant parts • • Gradual build-up of data might be needed Emphasis on 3 major components of OFCs—insurance and pension funds, non. MMF investment funds, and all other Prioritize to collect most important parts—cost/benefit analysis is useful to set priorities § Gathering the Data with emphasis on: • • Using standardized Report Form (SRFs), which cover three subsectors of the financial corporations sector and are sufficient to construct basic stock Financial Accounts Securities and derivatives data—become more important as corporations increasingly raise funds directly and actively engaged in using financial derivatives for hedging 63

Financial Institutions Division IMF Statistics Department Financial Statistics: Compilation Guidance (2) § Building and balancing the accounts • Definition and scope—need to decide on number of sectors, noting • • • that analysis of links is cumbersome with too many sectors, but significant relationships are hidden with too few sectors Role of residual sectors, which are built up from counterparty data or cover all other assets and liabilities—how much is missing: are distortions serious? is policy affected? Data conflicts due to multiple data sources where amounts or conceptual frameworks differ and adjustments are often used to reconcile diverse source data Several estimation techniques for balancing of accounts—e. g. , sum of assets in each instrument must be matched by sum of liabilities, resources and uses for each sector must be equal 64

Financial Institutions Division IMF Statistics Department Financial Statistics: Compilation Guidance (conclusion) § Presentation of Financial Statistics • Matrix presentation of flow of funds accounts—displays financial instruments by sector, which can be used to trace the impact of changes • v A two-dimensional matrix can provide cross-sector information on assets/liabilities (resources/uses)—basic flow of funds tables and SDDS Plus Matrix for Internationally Comparable Sectoral Accounts v A three-dimensional structure can show counterparty data for each instrument transaction Time series presentation v v Sector tables Can have mix of stocks and flows and mix different frequencies in the same table Instrument tables are used to summarize activity for instruments and a set of equations that are applied § Data quality and metadata • Some data series are usually more reliable, while others are not • Need to improve data over time, develop and publish metadata 65

Financial Institutions Division IMF Statistics Department Balance Sheet Approach Matrix (1) § General framework—capital account crises in the 1990’s/2000’s shifted focus to BSA, embedded in 2008 SNA, for examining macroeconomic vulnerabilities; IMF Board approved use of BSA in surveillance § Key features—objective is to analyze vulnerabilities and transmission mechanisms; focus on policy that can reduce vulnerabilities § Matrix of inter-sectoral balance sheets provides important information about sectoral balance sheet positions that are netted out in a consolidated country balance sheet § Sectorization—grouping institutional units into sectors based on 2008 SNA is important for constructing BSA and data analysis § Classification and valuation of financial instruments—need breakdown of financial instruments by type and distinction among them; more detailed analysis (e. g. , maturity and currency mismatches) according to country circumstances 66

Financial Institutions Division IMF Statistics Department Balance Sheet Approach Matrix (concluded) § Data requirements depend on the level of the desired sector and financial instrument disaggregation § Main data sources include SRFs, IIP, CPIS, CDIS, GFS, quarterly external debt statistics, reserve template, Joint External Debt Hub § Tracking balance sheet vulnerabilities for surveillance • BSA tracks the evolution of balance sheet vulnerabilities on a regular and • timely basis Provide an up-to-date monthly comprehensive picture of net positions of one sector against another with underlying claims and liabilities § Policy implications • Information should be timely to allow policymakers to identify and address weaknesses and systemic threat to the financial and economic system, and better understand the scale of official support 67